WTO Rules Retroactive U.S. Countervailing Duty Law is Lawful, but that Commerce did not Properly Investigate Possible “Double Remedies” in Cases against Products from China and Vietnam

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On March 27, 2014, the World Trade Organization (WTO) issued a Panel Report regarding “United States—Countervailing and Anti-Dumping Measures on Certain Products from China.”  The Panel upheld the validity of Section 1 of Public Law (P.L.) 112-99, a statute passed by the U.S. Congress with no debate and signed almost immediately by the President on March 13, 2012.  The WTO Panel, however, held unlawful certain investigations and reviews conducted by the U.S. Department of Commerce in relation to countervailing duties (CVD) against non-market economy (NME) countries, namely China and Vietnam.  Earlier this week, the Panel Report was appealed to the WTO Appellate Body which is reviewing the decision

Section 1 of P.L. 112-99 amended the United States Tariff Act of 1930 by adding a provision that provides a legal basis for the U.S. to impose CVD against imports from NME countries. The law was enacted to overturn a 2011 decision from the U.S. Court of Appeals for the Federal Circuit that ruled imposing CVD in addition to antidumping duties (ADD) on the same products from NME countries was contrary to U.S. trade law.  The amended law requires relevant U.S. administrative agencies and federal courts to apply CVD, if any, in all proceedings, resulting U.S. Customs and Border Protection (CBP) actions, and judicial proceedings initiated on or after November 20, 2006, involving products from NME countries.  In September, 2012, China submitted a Request for Consultations to the WTO.

China requested that the WTO Panel find that: (1) Section 1 of P.L. 112-99 is inconsistent with certain Articles of the General Agreement on Tariffs and Trade (the “GATT”) relating to transparency and notice; and (2) the U.S. failed to investigate and avoid double remedies in certain investigations and reviews initiated between November 20, 2006 and March 13, 2012, with the resulting CVD measures being inconsistent with certain Articles of the Agreement on Subsidies and Countervailing Measures (the “SCM Agreement”).  The WTO Panel rejected China’s challenges to Section 1 as being inconsistent with GATT requirements regarding the passage of legislation. 

In response to China’s “double remedies” claim, however, the Panel held that in 25 CVD  proceedings parallel to ADD investigations, initiated between November 20, 2006 and March 13, 2012, the U.S. has acted inconsistently with the SCM Agreement.  Specifically, the Panel found that the U.S. Commerce Department’s concurrent imposition of ADD and CVD calculated on the basis of an NME methodology on the same products, without investigating, in either the CVD investigations and reviews or in the parallel ADD investigations and reviews, whether double remedies arose from such concurrent duties.

The Panel concluded that to the extent that the measures at issue were inconsistent with the SCM Agreement, those measures had nullified or impaired benefits accruing to China under that Agreement.  Accordingly, the Panel recommended that the U.S. bring the investigations and reviews in 25 cases into conformity with its obligations under the SCM Agreement. 

The 25 cases include a broad range of products imported from China, including: Raw Flexible Magnets; Welded Austenitic Stainless Pressure Pipe; Oil Country Tubular Goods; Drill Pipe; and Aluminum Extrusions, which has an extremely broad Scope and captures components and finished goods in products used in the construction, medical device, and manufacturing sectors.

In light of this WTO Panel Report, producers and exporters in China and other NME countries, as well as U.S. importers, whose products are subject to ADD/CVD may consider taking steps to protect their legal rights.   

We would like to thank Ms. Yang Luan, Legal Intern, for contributing to this Client Alert.  Ms. Luan is from China and earned her LL.M. from Case Western Reserve University School of Law and is awaiting admission to the New York State Bar.  

For questions and assistance with issues involving antidumping and countervailing duty cases, including scope rulings, administrative reviews, and other proceedings, compliance with ADD/CVD orders, responding to CBP requests for information, demands for duties, investigations, penalties, preparing prior disclosures, as well as for assistance with other issues relating to international trade laws and regulations, please contact Managing Attorney, Jon P. Yormick, at jon@yormicklaw.com or by calling +1.866.967.6425 (Toll free in Canada & U.S.), Office: +1.216.928.3474, or Mobile: +1.216.269.5138.

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